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Credit control and debt recovery are crucial tools in the management of cash flow of a business. Problems with cash flow can cripple a business, causing it to struggle to meet normal day to day operational demands.

Most businesses will have some form of credit control policy in place. Given the importance of this issue to businesses it is always prudent to regularly review, and if necessary, improve these policies. Regular review allows for a business to adapt and tweak policies to reflect the ever changing landscape around conducting business with customers or clients.

Unfortunately, even the tightest credit control policies do not always prevent businesses from encountering the difficult issue of unpaid debts/accounts. Just like ineffective credit control polices, bad debt can place significant pressures on a businesses cash flow and its ability to effectively operate.

Thankfully, businesses have a variety of options available when they are caused to pursue debt recovery. Debts can be pursued through the following means: Small Claims Court application (if the debt is below £3,000), by County Court or High Court proceedings, by way of a Statutory Demand or through insolvency proceedings. There are pros and cons with each option and certain routes of recovery may be more applicable to a given business, depending on the circumstances that present themselves in any particular case. Advice can always be sought if a business is unsure as to which is the most appropriate option for that business.

A business should always seek to understand the financial position of the debtor. The old adage of not wanting to throw good money after bad would certainly apply in the debt recovery arena. There is little point in spending time and money pursuing a debt if it appears as though the debtor is, for example, insolvent.

If it is considered that the debtor has the means to pay, then a business would be best advised to take a pragmatic approach when pursuing the debt. On occasion an offer to settle might be made. Such an offer may be less than what the business is legally entitled to recover. However, it may be that the costs to the business in pursuing the full debt, in terms of time and costs, may outweigh any benefit gained by pursuing the full debt. These are considerations which a business must make on a case by case basis and there are no hard and fast rules in this regard. However, having an open mind throughout the process can often assist in achieving the best commercial outcome for the business.

Edwards and Co. has considerable experience in advising clients in relation to credit control and debt recovery. If you require any advice in this area please contact Paul Lenehan.

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